Thanks to recent market volatility, the Canadian Wheat Board will now charge a variable-rate per-tonne fee for Prairie wheat and durum growers who want to defer pricing of a given year’s crop into the following crop year.
As of Monday afternoon, the fee sat at $4 per tonne for wheat and $3.50 per tonne for durum for any farmers who wish to defer pricing of 2008-09 crops into the 2009-10 crop year.
That fee schedule, which took effect at 2 p.m. CT last Thursday (Feb. 26), “could change daily” at 2 p.m. CT (Winnipeg time), the CWB said on its website.
The CWB will now also require farmers to give advance notice if they plan to make such a deferral. Farmers who want to price their 2008-09 deliveries of wheat or durum into the 2009-10 pool must advise the CWB between now and June 30.
“Essentially, it boils down to reducing risk and ensuring fairness for all involved in the pool, since pool-year transfers can reduce returns,” the CWB said on its site.
“Switching grain from one year to the next creates uncertainty regarding pool size and affects the pool returns of both the old and new crop year since CWB sales need to be re-allocated. Pool switching makes risk management very difficult in an environment of increasing market volatility and uncertainty.”
Allowing farmers to make such deferrals has become a “more significant” issue lately given current market volatility, the CWB said. A recent CWB review of pool-year transfers found that “this practice affected both old-crop (2006-07) and new-crop (2007-08) returns. In both cases, they were lower,” the board said.
The resulting uncertainty of the pool size also affects the CWB’s planned pricing pace and can cause “significant” hedging losses, the CWB said.
The new fee will “offset the impacts” of a farmer’s deferral and will be regularly updated to reflect changes in the CWB’s pool return outlooks (PROs) and market conditions, the board said.
The program fee is non-refundable and is deducted from any future payments owing to a farmer who applies for a deferral, the CWB said.
The new pool pricing application form to price tonnes from 2008-09 into the 2009-10 pool is available on the CWB’s website.